The pandemic and its successive waves have forced consumers to evolve their purchasing habits. It has pushed them toward an internet-centric world with countless choices everywhere.
As a result, buyers are now better-informed and keener about their choices. They feel more confident shifting brands in a market full of alternatives. Furthermore, they expect omnichannel availability, tailored experiences, and quick deliveries. They expect to see their favorite brands on their favorite platforms.
This has made retaining profits even more difficult for small brands now. Online platforms have lowered the barriers to entry and have made the market denser. As a result, they now have to compete with a crowd of micro-niche competitors trying to snatch their buyers.
Core Challenges in Retailing
The challenges in retailing have plummeted in recent years. It has made survival and profitability harder, costlier, and more complex. Some of the biggest challenges that businesses face today include:
Hyper Inflation and Shrinking Profits
Global lockdowns have brought severe inflation waves, affecting every industry imaginable. The prices of raw materials are rising, and price wars are at their peak.
Retail enterprises are getting squeezed; profit margins are going down; and buyers are rejecting the inflated price tags. To survive such a situation, a brand needs to cut its expenses, sharpen its strategies, and aim for perfect product allocation. Digital transformation helps a brand with all.
Micro-Competitors
Consumers now have multiple choices throughout the platforms. They are exposed daily to numerous brands and products , and all claim to meet needs. The nearest retail outlet is no longer a last hope for product availability. Online alternatives are offering a range of options that brick-and-mortar stores can never do.
Result: Out-of-stock, which used to mean lost sales, now means lost customers. To minimize, if not eliminate, such situations, a brand needs near-perfect replenishment routines and a way to track its efficiency. Such routines are possible only with customer-behavior data that comes with digitization. It permits a brand frame data-backed distribution and replenishment strategies.
Customer Expectations & Behavior
The market is altering the definition of retailing. It is not limited to selling through brick-and-mortar stores. New mediums are overtaking the traditional ones which are quicker, easier, and always available. Customers are adapting such shopping experiences and expect the same from their favorite brands.
Result: Brands today need omnichannel strategies to connect with customers and sell at every possible touchpoint.
Inventory Challenges
Retail Inventories are short-lived and fast-paced, distributing which is a daunting task in itself. Inverse inventory flow (reverse logistics) complicates it even further. Mix them with gut-based management, and you get a perfect plan for inventory haphazard. Be it over stockings, under stockings, or spoiled products; everything is the outcome of this inventory haphazard.
Some other common challenges in Inventory Management are:
- Communication lags
- Inefficient warehouse management
- Overstock and Understock situations
Fulfillment Costs
Fulfillment costs are often confused with labor costs. However, they make up only a fraction of the total cost. Fulfillment costs are made up of the expenses like occupancy costs, indirect labor costs, and packing & shipping costs. Friction and inefficiencies in inventory flow skyrocket these costs and bring profits down.
To make inventory frictionless, a brand needs real-time demand insights and automation capabilities. Such capabilities are possible only with a digitized supply chain that can harness data and technology.
Four Main Areas Of Digital Transformation
Digital transformation transforms four broad parts of the supply chain and overall business. Those areas are:
Digitizing Operations For Frictionless Inventory:
Operations such as warehousing, logistics, and field sales are key to facilitating the inventory flow. Digital transformation automates and streamlines these operations.
Empowering Employees With Technology:
Digital transformation equips supply chain managers, warehouse managers, and distributors with data-driven tools and predictive models.
Engaging Customers At Every Possible Touchpoint:
Customers are the heart of a business’s success. Digitized supply chains allow a brand to connect with its customers at every point.
Reimagining Products and Creating Value:
Digitized supply chains harness data to show what the customers want. It helps a brand craft products that the customers crave.
Benefits of Digital Transformation
On top of the above points, Digital Transformation offers many tangible benefits for retail brands. Here are some crucial ones to keep in mind:
Competitive Advantage
Digital transformation empowers a brand to reimagine its interactions with customers and environment. It helps a brand in keeping up with the market dynamism and solve its day-to-day problems with AI, ML, and predictive models.
These capabilities, when acquired right, prove to be the most significant competitive advantage of an emerging brand today. It helps the brand outrun its competitors and win new customers.
Omnichannel Retailing
More than two-thirds of purchases today involve at least one digital device and platform. This is a clear indication of the Omnichannel future of retailing. Businesses globally are endeavoring to become omnichannel sellers. However, their traditional supply chains are the most prominent issue pulling them back.
A digitally optimized supply chain makes the omnichannel transition smooth. It helps a brand build hassle-free shopping experiences, and simplifies the maze of orders, inventory, logistics, and reverse logistics. It paves the road for successful omnichannel transformation.
Product Specialization
Good products are the core determiners of a brand’s success in winning a good customer base. However, an emerging brand often struggles with its product development. It cannot get accurate market feedback and know whether the products are up to the mark.
With a digitized supply chain, a brand can gather data on its product performance. It can use the data to make its product fit perfectly with its customers’ needs. Digital transformation lets a brand see whether customers like, dislike, or are bored with its product.
Control tower and Dashboard
Digital transformation transforms the business decision process from an intuition-driven to a data-driven process. It simplifies scattered supply chain data, centralizes them in cloud infrastructure, and establishes a centralized dashboard for the decision-makers.
These integrated dashboards show them the real-time state of the supply chain. They assist them in making better business decisions. Furthermore, It equips them with Big Data Capabilities. They use these capabilities to forecast future demands to be better prepared for supply chain fluctuations.
Check out our digital transformation page to know more.